UPFRONT 2: Programming Report – Cable Inching Ever Closer To Parity – Matching pricing levels of the Big Four no longer looks like pie in the sky

By Michael Burgi

It’s been the battle cry of cable sales executives for the last several years: parity, parity, parity with the broadcast networks in the pricing of commercial- advertising inventory. But the cable industry to date has lost every one of those battles.

Could this year’s schizophrenic upfront market provide cable with its first successful assault on reaching Parity Hill and achieving what its salespeople believe is a fair price? Considering the groundswell of TV viewers choosing to spend more of their time watching the ad-supported cable networks, at broadcast’s expense–a trend that has continued for the last four TV seasons and did not abate in the least during the 1996-97 season–the sales forces of many cable networks hope it will be the case. But not everyone agrees it will happen anytime soon, if ever.

‘This year we may see the dollars follow the ratings,’ says Steven Heyer, president of worldwide sales, marketing, distribution and international networks at Turner Broadcasting System. Heyer, who led the Turner sales force for three years before moving up to the No. 2 position at TBS last year, took a major step toward trying to make that parity happen sooner rather than later by putting together ‘Media at the Millennium.’

MATM is a sales presentation Heyer cooked up with Barry Fischer, a former Wells Rich Greene BDDP media executive who joined Turner’s organization last year as executive vice president of marketing and research at Turner Broadcasting Sales Inc. Well received by agencies that sat through it, MATM aims to convince media buyers to shift more of their national TV dollars away from the lowest-rated broadcast-network fare toward cable. Heyer’s aggressive sales pitch certainly is not the first of its kind. Several other cable networks and even the Cabletelevision Advertising Bureau, the industry’s cheerleader organization, have tried their hand at convincing agency planners to put aside more money for cable, historically to little or no avail. But this year, MATM seems to have gotten its pro-cable message through.

There are truckloads of money at stake. The broadcast networks eagerly expect to surpass the magic $6 billion mark in upfront sales split among the Big Four, while cable is gunning for a $2.1 billion pie divided up some 30 or 40 different ways.

‘It used to be that it required 20 cable spots to approximate the reach of one broadcast spot,’ says Heyer. ‘Now it requires only two, three or four. So now what was once unmanageable is now eminently manageable. Cable is a viable substitute. It’s the beginning of a sea-change in the way this business is bought and sold.’

Heyer’s presentation had some impact this year, as media planners shifted some of their media budgets to cable. Buyers estimate that their media planners funnelled anywhere from 2 percent to 15 percent more dollars away from the Big Four into cable budgets. Buyers also reported that the syndication upfront also took some dollars away from the broadcast networks.

But pricing to date for cable has remained more or less the same, with higher CPM increases coming in single-digit quantities. Heyer puts it a bit differently: ‘Is it at the force of a fire hydrant? Not yet. This year we tried to give people the tools.’

Larry Goodman, president of ad sales for all CNN-related properties at Turner, points out that CNN and a few other cable networks–ESPN, for example–do command pricing parity with their network programming competition. ‘For the top-tier cable networks, there is parity,’ explains Goodman. ‘ESPN’s CPM relative to network sports, or CNN’s relative to news, is at parity if not higher than broadcast.’ He admits, though, that the few networks that enjoy the high price tag are in the distinct minority. ‘With so many small networks, the overall price for cable goes down. They all contribute ratings points but not in aggregate dollars.’

Sure enough, the appearance of more and more cable networks that reach a pittance of homes gives agencies new places to buy on the cheap when the major cable networks become too expensive. Fox News Channel and MSNBC, for example, pick up budgets from advertisers who are scared away by CNN’s spiraling CPM increases, some of which this year went north of the 20 percent mark. So does Speedvision against ESPN’s prices.

Some network sales executives warn that reaching pricing parity with broadcast could be a double-edged sword. ‘What makes cable appealing and makes it impossible for buyers to ignore is price: it’s still a bargain,’ says Paul Rittenberg, vice president of sales with Fox News Channel, who has many years experience on the agency buying side. ‘But when CPMs approach parity it becomes a ratings parity issue. There is something to the argument that as pricing edges closer and closer (to broadcast), cable is going to be held to higher standards. If you want to play with the big boys,’ asserts Rittenberg, you have to behave like them by controlling inventory better and making yourself an easier buy.

All that said, it’s not likely anytime soon that cable will reach the parity in pricing it seeks. MTV Networks’ executive vice president of ad sales and promotion, John Popkowski, isn’t holding his breath. Popkowski is known as one of the toughest sales executives in the TV sales business, period. ‘We are not getting parity on pricing,’ states Popkowski in his typical, cut-to-the-chase manner. ‘The reason is people are still reluctant to pay 40 percent increases’ on cable. That 40 percent is figured by adding the dollar-volume increases that come with cable’s growing audience on top of CPM increases that cable sales executives constantly seek. Says Popkowski: ‘As long as the broadcast networks continue to raise their prices, we’ll continue to stay behind, until the client community says ‘No more’ to that and comes around to the idea that we are worth the price.’

It doesn’t help cable that the broadcast networks write some 60 percent of their ad revenue in prime time, the most expensive daypart to buy. To boot, ratings are disproportionately heavy in prime time. Though cable also commands its highest CPMs in prime time, much of its ratings growth has come from several dayparts, not only prime time. It means that cable ends up at a seeming disadvantage because its success doesn’t hinge on only one daypart as it does with the networks.

One other permanent obstacle to cable’s parity quest is simplicity, according to Rittenberg. Agencies are staffed much more leanly than ever. Inherently, because buying a sufficient number of gross ratings points on cable to approximate a broadcast buy requires buying more networks, agencies will gravitate to the more simple buy. ‘In just about any instance, a tie is going to go to the incumbent,’ says Rittenberg.

CNN’s Goodman agrees but sounds a bit more optimistic about change coming in the agencies approach. ‘Cable will eventually reach that parity when the landscape isn’t four mountains surrounded by many hills but is made up of many hills of varying sizes,’ he says.

Goodman’s boss, Heyer, puts it a bit more aggressively. ‘In a few years, the only difference between CBS and TBS is that we will have better programming and we’ll own them,’ quips Heyer, though you get the feeling he is dead serious.

Copyright ASM Communications, Inc. (1997) ALL RIGHTS RESERVED